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Peter Lewis: Asia Business Correspondent on US and China trade officials holding talks this weekend · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks. It'd be
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  Speaker 2: Peter Lewis our Asia Business Correspondents with us Hey, Peter.
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  Speaker 3: Good Evening, Heather Now, Peter.
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  Speaker 2: Obviously Trump's tariffs are going to come down on China.
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  Speaker 2: But is it because he's said as much. But will
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  Speaker 2: it happen after this weekend?
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  Speaker 3: It's hard to know. I think we've got to sort
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  Speaker 3: of temper our expectations a bit about this weekend, because
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  Speaker 3: these aren't really negotiations about trade. Their talks about having
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  Speaker 3: talks and whether or not the right circumstances can exist
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  Speaker 3: whereby they can start having some substantive discussions about trade.
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  Speaker 3: And the sticking point at the moment is that China
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  Speaker 3: has been insisting all along that before there can be
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  Speaker 3: those discussions, Trump needs to remove his tariffs on Chinese goods. Now,
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  Speaker 3: it's hard to imagine that Donald Trump is going to
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  Speaker 3: remove them in their entirety. Maybe he might partially reduce
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  Speaker 3: them and say come down. Instead of imposing one hundred
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  Speaker 3: and twenty five percent tariffs, maybe impost fifty percent or
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  Speaker 3: something like that. So the question is is that going
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  Speaker 3: to be enough to get China to the negotiating table,
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  Speaker 3: and I think this is what we're going to hear.
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  Speaker 3: A lot of the discussion will be about over the
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  Speaker 3: weekend to try and create those conditions where they can talk.
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  Speaker 3: But even if they do get to the point, we
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  Speaker 3: now have a template for what Donald Trump thinks a
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  Speaker 3: trade deal ought to look like, and that's the US
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  Speaker 3: trade deal that was announced yesterday. Now that is not,
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  Speaker 3: in any way, shape or form a trade deal as
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  Speaker 3: you would imagine it. What it is is a tariff
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  Speaker 3: reduction agreement. In other words, I've put one hundred and
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  Speaker 3: twenty five percent tarofts on you, or whatever they are
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  Speaker 3: in the UK's case, and I'll reduce some of them
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  Speaker 3: across certain sectors. But at the end of it, tarots
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  Speaker 3: are still much high than when Donald Trump came to
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  Speaker 3: office in January. Now, is that going to be workable
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  Speaker 3: with China? I think not, because, first of all, those
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  Speaker 3: types of deals where you sort of swap tariff arrangements
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  Speaker 3: on certain limited sectors only really work where you have
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  Speaker 3: balanced trade or maybe a trade surplus. But the US
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  Speaker 3: has a huge deficit with China, so that isn't going
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  Speaker 3: to be the right templates. In any way, it's not
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  Speaker 3: going to be of any interest to China whatsoever. They
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  Speaker 3: want to have tariffs removed and they want to have
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  Speaker 3: a much more encompassing broad trade agreement, which will take many,
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  Speaker 3: many months to get to pieces.
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  Speaker 2: So at the same time, and obviously amidst the trade worries,
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  Speaker 2: China Central Bank is doing a whole bunch of things
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  Speaker 2: to try and stimulate the economy. Now are they doing
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  Speaker 2: it to stimulate what they are already seeing happen, like
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  Speaker 2: the impact they're already seeing, or are they doing this
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  Speaker 2: to prepare for the impact of these tariffs actually staying
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  Speaker 2: in place for a long time.
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  Speaker 3: I think both. I mean, at the moment, they are
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  Speaker 3: suffering an impact of this. It's hitting the economy because
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  Speaker 3: trade between the world's two largest economies has just completely
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  Speaker 3: ground to a halt, and you look at you see
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  Speaker 3: that in things like the shipping numbers. If you look
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  Speaker 3: at the port of Los Angeles, for example, where most
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  Speaker 3: Chinese ships go through to bring their products to the US,
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  Speaker 3: trade is down about thirty percent compared to this time
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  Speaker 3: last year. So it's hitting Chinese exports, which is a
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  Speaker 3: big part of the Chinese economy. So it is absolutely
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  Speaker 3: hurting the Chinese economy at the moment. So this is
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  Speaker 3: partly to deal with what it's already seeing, but I
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  Speaker 3: think it does fear that this can only get worse
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  Speaker 3: because the longer this goes on, where the two countries
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  Speaker 3: are not doing any trade with each other, it's going
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  Speaker 3: to hurt both economies. It's going to hurt the US consumer,
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  Speaker 3: and it's going to hurt the Chinese exporter and particularly
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  Speaker 3: small manufacturers who provide lots of the goods and components
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  Speaker 3: that US need to put together products for their consumer base.
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  Speaker 3: So China is assuming this is going to get worse,
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  Speaker 3: but I think it's digging in for the long term here.
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  Speaker 3: It's assuming the worst at the moment, and in the
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  Speaker 3: meantime it's looking for other markets. And if you look
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  Speaker 3: at Chinese trade, for example, with Southeast Asian nations, it's
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  Speaker 3: holding up reasonably well. So they are looking through other
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  Speaker 3: areas where they can try and find replacement markets for
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  Speaker 3: what they're assuming is going to be a permanent loss
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  Speaker 3: of the US market. The problem is these measures that
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  Speaker 3: they've announced, which is a twenty five basis point interest
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  Speaker 3: rate cut and also a cut in the reserve requirement ratio,
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  Speaker 3: which is the amount of money banks have to put
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  Speaker 3: aside to guarantee loans and things. It's not going to
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  Speaker 3: be enough, so China is going to have to do
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  Speaker 3: a lot more if it wants to, in particular stimulate
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  Speaker 3: its domestic economy to try and make up for the
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  Speaker 3: loss of exports and stuff.
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  Speaker 2: Peter is always good to talk to you. Thank you
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  Speaker 2: so much for well Check to your next week. That's
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  Speaker 2: Peter Lewis, our Asia Business correspondent.
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